A journey of a thousand miles begins with single step, said a famous philosopher. Even the greatest undertaking has a humble beginning. To accomplish anything, we will have to start somewhere and we can never do anything if we wait until all conditions are perfect.

That same thought must be on the minds of the management of China Eratat Sports Fashion (CE), when they made the decision to press on with a listing on the Singapore Exchange despite the current financial malaise.

Debuting on 17 April and closing at $0.31 apiece, the Chinese company managed to stay slightly above water on the first day of listing, probably due to improved market conditions as well as a resurgence of interest in S-shares.

FIRM FOUNDATION
CE is primarily engaged in the manufacture and sale of sports footwear and apparels. The company’s products are sold and marketed under the name “ERATAT”, which has been established since 1998.

Since establishment, the brand has garnered a series of accolades such as the “2006 China Best Public Image Brand” which is a sterling testimony to the quality and marketing of CE.

Manufacturing activities take place in the company’s facilities located in the province of Fujian, China. Following the completion of the construction of the new factory at Quangang district in December 2007, CE had installed three production lines and is slated to commence full utilisation in 1Q09 with estimated production of 7.2m pairs of footwear.

On the distribution side, CE’s extensive line of sports wear is distributed through direct sales to retailers, export and local distributors. Currently, its products are available at over 1,390 locations across the country, of which 764 are ERATAT specialty stores.

READY MARKET & ROBUST FIGURES
Situated in China, CE will benefit from a population that is estimated to reach 1.34b in 2010. Along with the rapid economic growth, the burgeoning middle class is set to swell. Further, with an unprecedented ruralurban migration taking place, CE has access to a ready pool of customers.

On a positive note, the Chinese economy has continued to expand at a blistering pace. Latest first quarter economic growth came in at 10.6% in spite of the slowdown in the US. China is expected to weather the subprime storm as the government has taken steps to divert exports to other countries apart from America.

Following its listing, CE is expected to accelerate its expansion. Plans are underway to increase the number of distributors and stores and augment existing manufacturing facilities.

1H08 revenue grew to Rmb196m from Rmb158m in 1H07 with the apparels and footwear segments growing. Earnings was Rmb33m which is already 81.5% of FY07 profit.

Compared with its peer, China Hongxing Sports, which is trading at 18x PE, CE is undervalued at 15.8x FY07 earnings.